How the Game Industry is Changing

The past few years have been pretty rough for the games industry, but no one can say they’ve been boring. Anyone who’s familiar with gaming’s history might lean back and declare that this is the biggest shift the pastime has undergone since the North American market resurrected with the Nintendo Entertainment System, and for the most part, they’re right.

Over at GamesIndustry.biz, Rob Fahey wrote two columns, “Rock and a Hard Place” and a follow up, “Riders on the Storm” that outline the industry’s current growing pains, including the stagnation of core developers, their transition to mobile and social games, and the rising costs associated with core game development. This is not the first time the industry has been through rough times, Fahey points out, but weathering these troubles will prove more difficult than in the past.

“[I]t’s not spiralling development costs that are being highlighted as the problem,” Fahey writes. “Those, quite simply, are a fact of life in such a technology-driven market. Clever tools and middleware ease the burden, but the reality is that if you want graphics and content that’s markedly better than what’s gone before, you have to pay for it.”

“However, it’s only worth paying for it if doing so makes more people buy your game – and that’s where the problem lies this time. More people aren’t buying core games.”

Fahey has examples to back up the seeming stagnation of the core game market: Square-Enix’s massive losses for its fiscal year is one indication, as are the layoffs at Disney Interactive’s Black Rock Studios. Square-Enix weathered multiple troubles through 2010, including the disastrous launch of its latest massively-multiplayer online RPG, Final Fantasy XIV, and Black Rock’s troubles can be traced to the poor performance of Split/Second, a racing game that was well-received, but shared a launch window with Bizarre Creations’ own racing title, Blur.

Game development has never been without its extreme risks, but the difference with game development today, says Fahey, is that developers can expand to seemingly safer pastures by focusing less on core games and more on the booming social and mobile markets.

“In a nutshell – developing top-tier console games has never been more expensive, and it’s never been more risky,” Fahey writes. “As such, it’s never been less attractive to publishers, who find themselves forced into the position of funding individual projects with cash backing that used to fund a whole title catalogue, and then chewing their nails as they wait to see if they’re ever going to see any of that cash again.”

Fahey is correct in pointing out that developers and publishers are growing more hesitant about putting together core titles, and the reasons he lists are good ones: The social and mobile markets are healthy, and far cheaper to develop for. However, Fahey also states (as do other games writers) that the core market is at a standstill, as “more people aren’t buying core games.”

That’s a difficult statistic to gauge. The games industry is changing, of that there’s no doubt, and it’s changing more thoroughly than it ever has in the past. It’s changing primarily via expansion: Suddenly, there’s a game out there for everyone, be it on a console, PC, Facebook, a smartphone, or a handheld gaming system. But the playing field has grown, not shifted; in other words, if Mom didn’t play games before, she probably does now via free webgames or FarmVille. However, the number of gamers who have shifted from core titles exclusively to free-to-play fare is probably quite small. Core gamers are still playing core games.

The record-breaking sales from titles like Call of Duty: Black Ops, Portal 2 and Mortal Kombat indicate that there’s still a huge audience for core gamers, and it will endure for a long time to come. That said, adult core gamers have only so much time and income to go around, which goes some way to explain why Split/Second was left in the dust while Blur screeched across the finish line. Still, a busy parent who grew up with gaming is likely to bequeath his or her game collection on his or her offspring, and a a new generation of core gamers is born–presumably.

Here’s where the future of core games really does get a bit muddy. Growing up, previous generations had far fewer gaming options to latch onto. Some kids sided with Nintendo, others sided with Sega, and some ascended to the PC. Kids today, on the other hand, can play core games on their consoles and PCs, or they can peck away on handhelds, mobile phones, or handheld game systems. They can also access one of hundreds of free-to-play virtual worlds tailored to the stuff kids like, including cars, monsters, and dinosaurs.

Will this young generation “graduate” to core games, or will they stick to social and mobile offerings? Will they branch out and enjoy a little bit of everything? What will happen when, like their parents, they’re suddenly pressed for time and money and have to pick one game out of thousands?

That’s why developers and publishers are thinking in the long-term as well as the short term. Core franchises are not being abandoned, but release rosters must be trimmed, and titles initially meant for retail will no doubt be shifted to a digital distributor like XBLA or Steam. In turn, money and manpower is going into mobile game studios and social games. Whatever the future of gaming brings, the men and women who dole out the good stuff understandably want to make sure they’re prepared.

About Nadia OxfordNadia is a freelance writer living in Toronto. She played her first game at four, decided games were awesome, and has maintained her position since. She writes for 1UP.com, Slide to Play, GamePro and other publications, and is About.com’s Guide to the Nintendo DS.

I think the industry is becoming more like the movie business, where a few lucky blockbusters hopefully make up for the losses run up by the other offerings. As the industry expands and attracts wider and often older audiences, it invariably has to follow the lead of the other mainstream entertainment media, i.e., blockbuster books, movies, etc. This means much higher development and marketing costs, which can put the whole studio at risk. Business has always been about ever-increasing gambling risks and rewards.

Interesting. I’m a Gen-X and have been gaming all my life (pretty much). I’ve noticed that the Gen-Ys I’ve come into contact with (at work at least).. don’t even have an XBOX 360 or a PS3. It’s just us (the “older fogies”) who own such devices at home. The younger crowd doesn’t seem all too interested (or AS interested). They’re more into stuff like Angry Birds and other casual/social games. Maybe this is the future of gaming? I certainly hope it doesn’t eventually take over wipe out core gaming.. not in my lifetime at least 🙂

About Scott Steinberg

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